India, China to be Wary as IMF Warns of Protectionism Hype Next Year

While India is going agogue with its Pakistan-centric foreign policy, IMF has warned both India and China that the global economic growth will remain subdued this year following a slowdown in the United States and Britain’s vote to leave the European Union.

The IMF, in its October 2016 World Economic Outlook, said India, continues to be resilient with its gross domestic product projected to expand 7.6% this year and next, the fastest pace among the world’s major economies and urged India to continue reform of its tax system.

On global economy, IMF chief economist Maurice Obstfeld said: “We have slightly marked down 2016 growth prospects for advanced economies while marking up those in the rest of the world."

The 2016 report highlighted the precarious nature of the recovery in 8 years after the global financial crisis. It raised the specter that persistent stagnation, particularly in advanced economies, could further fuel populist calls for restrictions on trade and immigration.

The world economy will expand 3.1% this year, the IMF said, unchanged from its July projection. Next year, growth will increase slightly to 3.4% on the back of recoveries in major emerging market nations, including Russia and Brazil.

Advanced economies will expand just 1.6 %in 2016, less than last year’s 2.1 %pace and down from the July forecast of 1.8 percent, it said.

The IMF marked down its forecast for the United States this year to 1.6 percent, from 2.2% in July, following a disappointing first half caused by weak business investment and diminishing pace of stockpiles of goods. U.S. growth is likely to pick up to 2.2% next year as the drag from lower energy prices and dollar strength fades.

Uncertainty following the “Brexit’’ referendum in June will take a toll on the confidence of investors. U.K. growth is predicted to slow to 1.8 % this year and to 1.1%in 2017, down from 2.2% last year.

The euro area will expand 1.7%this year and 1.5% next year, compared with 2% growth in 2015.

Growth in Japan, the world’s number 3 economy, is expected to remain subdued at 0.5% this year and 0.6% in 2017. In the medium term, Japan’s economy will be hampered by a shrinking population.

In China, policymakers will continue to shift the economy away from its reliance on investment and industry toward consumption and services, a policy that is expected to slow growth in the short term while building the foundations for a more sustainable long-term expansion.

Still, China’s government should take steps to rein in credit that is “increasing at a dangerous pace’’ and cut off support to unviable state-owned enterprises, “accepting the associated slower GDP growth,” the IMF said.

China’s economy, the world’s second largest, is forecast to expand 6.6 %this year and 6.2% in 2017, down from growth of 6.9 % last year.

Countries in the Middle East are still confronting challenging conditions from subdued oil prices, as well as civil conflict and terrorism, noted IMF in its report.

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